[Jason]

I just had a kid & have been looking into 529 plans. Wondering how much people contribute to their children’s plans and the reasoning why.

I want to get the account to at least 35k since even if they don’t go to college they could roll that amount into their IRA, but 35k also probably won’t cover much of their 4 year degree in 18 years lol (so essentially trying to thread the needle between underfunding vs overfunding).

Appreciate any advice!

[Matt]

Does anyone know about taking money out of these 529 plans? Can you keep them growing through college to get 4 more years of growth then pay off loans that they took when they graduate?

[Andrew]

Consider a small amount if you get a tax break AND you have fully funded your own retirement.

There are so many reasons, from scholarships to a complete restructuring of higher education, that could happen in the next 18 years.

Also, 529 may not be better than taxable. Hypocrisy check: three kids, one in middle school, $0 in 529s.

[Ashley]

Prioritize your retirement. And then if you want to give them choices aim for at least $200,000. Right now in most states college runs $35-40k a year – in state.

There are opportunities for savings, but $200k would likely get them well on their way.

We paid for college for our two oldest and will pay for the third.

They try for scholarships and pitch in what they can save for but it’s minimal in comparison.

[Colleen]

Our goal was a debt free 4-year public in-state degree – which would cover about 2 years at a private/more expensive choice.

We definitley risked overfunding – but as our kids now head to college the emotional benefit of having money set in a bucket exclusively dedicated to education for each of them has been one of the biggest benefits in my opinion.

Having multiple children in college at the same time (with some who desire professional degrees that will require even more education) – I notice how it “feels” to spend this money after 18 years of saving it.

The emotional benefit of the 529 has been an extreme positive for our family.

Now mathematically – Investing for them from 0-14 (when we hit our goal) in our 529 in specific funds that were available vs.

having that in a taxable brokerage account – I would need someone to do those calculations for me to see if it was the ‘best’ decision.

But emotionally it has been a perfect fit.

[Laurie]

It amazes me how many people who are working hard for FI for themselves are not advocates for helping their own children enter adulthood debt free.

Our three children – now 35, 32 and 27 – have told us many times that the greatest gift we ever gave them was to graduate college debt free.

We used 529s, my husband’s Post-9/11 GI Bill benefits, and filled in the gaps with out of pocket money.

Two went to instate public universities and one to an out of state public. All three have advanced degrees now.

Being debt free freed them to be able to be flexible in their early careers in terms of not having to service debt immediately out of college.

If you don’t feel 529’s are the best place for your money, then invest that money differently, but mark it as “Jane’s college fund”, and never dip into it for your own use.

[Stacey]

Everyone with kids needs a “paying for college” plan. Whatever it is.

Not to get political but the current administration wants to make changes to loans (passed House in bill, now onto Senate)- capping Parent Loans, capping graduate loans. That adds an unknown.

Your kid wants to be a Dr….. well you better have enough to pay for Med school because they won’t be able to borrow enough if passed.
But in general I was OK with overfunding.

It could get rolled to future grandchildren. A simple way to pass on wealth. Now it can get rolled into IRA. No grandchildren?

Then my kid can pay the whatever penalty is associated when they inherit it.

You could also use a Roth to fund college if you are able to contribute now, if you are fearful of overfunding the 529.

[Lauren]

Tough decision. We want our kids to be college bound so put more in than the rollover amount. And the growth will help too.

Worst case, according to consumer reports, you can withdrawal it at the beneficiary’s tax rate, which is going to be low when they’re young, and a 10% tax penalty only on the growth, not on the investment amount.

[Barbara]

We had a goal of covering costs for an in-state school. I think we put in $200-$300 per month from the time he was in kindergarten (but honestly I’m not sure).

We were very lucky in that my mom contributed almost the same amount as well, and the market did great.

We weren’t concerned about over funding. In the end he got a major scholarship, so the 529 hasn’t been used.

It’s fine, he will use it for grad school to start and then it can be a fantastic gift to any future grandchildren we might have.

[Misty]

Have 1 in grad school and 1 in college right now.
Best advice is put the money in EARLY!

We did almost all of our contributing before they were 10 and let the market work for us.

Our goal was $120k/child. The market did very well for awhile and they each ended up with over $160k.

We were able to fund flight fees for one and grad school for the other bc we have so much.

But I will say it is MUCH nicer to be on the “too much money” side of this problem.

Likely will have a bit left to move to a Roth for them too!

[Lisa]

Contributions grow tax free. A lot of states give credit for contributions if your plan is set up in your state. We were very happy to have saved over the years to pay for our kids college 100%.

It was nice to have the 529 funds available.

If it’s overfunded, Roth or Roll to the next kid, grand kids, etc.

A lot of my clients will continue the max to get the credit and save outside the 529 for the rest.

A good way to have a mix of funds.

[Elyzabeth]

single mom, opened a 529 for my kid when he was 6 and started transferring $25 a week.

it predicts he’ll have $18k when he turns 18

[Graham]

I have 2 kids which in my state means a maximum tax deduction of $15k per year, so that’s what I’ve been doing since birth.

With tax free growth, it’s a great investment vehicle even if they don’t use it all up for college or grad school.

$35k x 4 can go into Roth IRAs since there are accounts in the kids’ names as well as for my wife and I.

Anything left beyond that can transfer to other family members or even grow for the next generation.

[Bill]

Even a “cheap” college is going to be $25k+ per year. Of course, you aren’t obligated to pay all of it, but if that is your goal, I would take 100k and inflate it 5% per year until they graduate.

[Ellie]

Single mom of two, I contributed what I could and wound up with $45k each. The oldest decided not to go, and when the youngest got in, I was sad that I hadn’t saved more, because even with scholarships we were $25k short per YEAR.

His gap year turned into “nah, college isn’t for me,” so the accounts are in index funds, available for any educational use if they have them, and to become Roths later as well.

Plan and adapt!

[Christopher]

Similar boat here, but more kids and less than 18 years. My vague plan is to hit roughly $35k, and then add more if college looks more probable as they get closer to graduation?

With >1 kids, you can at least re-beneficiary overage to another kid.

If you have nieces or nephews, or grandkids, you could also set them as beneficiaries of any overfunding later on.

Because of that, I’m less worried about overfunding than I am underfunding (it just becomes generational wealth, rather than generational debt).

[Andrea]

We started at $50/month and moved up to $300/month per kid over the years. We’re in a state where universities are about $25 thousand per year all in.

We ended up with about $80,000/kid. That fully covered one kid who spent a year at community college during covid while living at home.

The other one is in a fraternity living his best life.

He got a decent scholarship but will still be about $10-$12,000 short come graduation.

We feel like he can be responsible for that since we’ve help support him throughout this whole process with extra gas & grocery money, etc.

Part of me feels guilty that he won’t come out free and clear but I feel like saving every month since I was pregnant for 22 years is a generous gift.

We were up front with the kids about how much money they had available to them and allowed them to decide how and where to use it.

[Susan]

Our target was to have enough in the 529 to cover the average cost of our in-state public colleges. When they were in 7-9th grade my parents contributed enough to pay for one year at a public U.

So, we adjusted to put some of what we had been saving into a brokerage account so we wouldn’t over save in the 529.

One kid just graduated from college and has about $10k left in the 529 which he’ll use for grad school.

2nd kid went to a slightly more expensive school and will use it all on undergrad

[Author]

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